Metals stocks close higher, prices fall

NEW YORK (CBS.MW) - Shares of most gold and silver companies closed higher Thursday despite a second-straight decline in gold futures prices.

On the Commodities Exchange division of the New York Mercantile Exchange, December gold closed at $311.20 an ounce, down $1.40.

On Thursday, the Dow Jones Industrial Average
DJIA, +0.72%
closed at 8,317, down 177 points. It touched a low at 8,278 and a high of 8,559. The Nasdaq Composite Index
$COMPQ
shed 22 points to 1,299. See Market Snapshot.

Also on Comex Thursday, the December contract for silver closed at $4.362 an ounce, down 4.5 cents.

Platinum for January delivery added $5.40 to $580.20 an ounce, while December palladium fell $5.50 to $310.50 an ounce.

December copper added 0.85 cent to 70.3 cents a pound and December aluminum climbed 0.5 cent to 63.45 cents a pound.

Also, as of late Wednesday, gold inventories at Comex stood at 194.7 million troy ounces, up 103,441 troy ounces from the previous day. Silver inventories rose 600,795 troy ounces to 108 million troy ounces. Copper stocks were up 114 short tons at 381,390 short tons.

Metals issues close higher

Metals indexes ended the volatile trading session mostly higher on the back of weakness in the U.S. stock market.

De-hedging pace a positive for gold sector

Recent moves by mining companies could signal higher prices for gold and metals issues ahead, an analyst said Thursday.

Mining companies are de-hedging at a "head-spinning pace," said Kevin Kerr, an analyst at Weiss Research in Palm Beach Gardens, Fla.

Precious metals consultant Gold Fields Mineral Services reported that producer de-hedging contributed 255 tons of demand for gold in the first half of this year, up from 38.5 tons in the first half of 2001, according to Kerr.

Hedging refers to a company's move to sell gold before it's even mined, so by de-hedging, companies are covering those forward sales.

Kerr believes gold producers are making the move because they see higher prices for gold ahead. "They're rushing to unwind hedge books to maximize their profits," he said, thus increasing demand and cutting supply.

The recent rally in the U.S. stock market comes too late for most investors, who watched "in horror as the stock market lost half its value since its peak," or $8.5 trillion, Kerr said.

"Those bitter losses are prompting many investors to pull their money out of stocks and put it into an investment with intrinsic value, gold, and the shares of companies that mine the yellow metal," he said.

Kerr noted, "Gold has no board of directors or debt. It will never rust, decay or file Chapter 11. Gold boasts no non-expensed stock options, conflicts of interest or accounting tricks."

Barrick earnings slip

On Thursday, Barrick Gold reported a 42 percent drop in third-quarter income as lower-than-anticipated grades and recovery rates resulted in lower production and higher costs.

Before non-hedge related adjustments, Toronto-based Barrick reported earnings of $37 million, or 6 cents per share, compared with $62 million, or 12 cents per share, in the third quarter of 2001. See full story.

On Wednesday, Agnico-Eagle Mines
AEM, -5.32%
said Wednesday that it lost $600,000, or a penny per share in the third quarter, compared with a loss of $5.6 million, or 8 cents per share, in the same period in 2001. The mining company estimated that gold production in the fourth quarter would likely reach 100,000 ounces, with cash costs of about $110 an ounce. Shares rose 5 cents to $13.03.

On Tuesday, Meridian Gold said it earned $9.2 million, or 10 cents per share in the third quarter, on sales of $33.6 million, compared with $10.1 million, or 14 cents per share, a year earlier on sales of $29.4 million. Meridian produced a total of 103,918 ounces of gold at a cash cost of $101 per ounce during the quarter. Shares of Meridian Gold
MDG, -1.22%
fell 35 cents to $15.85.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.